Comments
by Joan Veon: Usually at the end of a G7 press briefing, the room
is packed full. This one had more security than reporters. It was
very unusual. Furthermore, they did not ask for press names and the
person with the microphone did not get close enough to the reporter
asking the question so everyone could hear. This is NOT how U.S. Treasury
press briefing are and all of the key people were there to set it
up. Snow appeared very unsettled and appeared to want to go through
the motions and "get it done." Where was the rest of the press? Good
question. The Reform of the IMF is pretty major. Phrases of interest
are highlighted.

In
January, the Bank for International Settlements chief economist, William
White wrote a white paper of his own calling for a return to the gold
standard or global or regional currencies to help with global imbalances
and for the IMF to have the power of surveillance over a country's
finances even if it means losing part of their national sovereignty.

This
IMF/World Bank meeting was extremely historic because it, in essence,
gave the IMF more power than ever before in its history. Part of the
crescendo in this opera was the fact that everyone was calling for
a greater supervisory role for the IMF. The white papers, the discussion,
the agenda, the objective of the meeting was simply to use "global
imbalances" to take more financial sovereignty that ever before. The
chief economist of the IMF said this, "People tend to dismiss these
[role of various actors today] as minor frictions, sand in the gears
of the globalization juggernaut. History, however, suggests there
is a short distance from economic patriotism to unbridled nationalism.
This is why the multilateral discussions in meetings like this are
so important. They help ensure we continue to benefit from globalization
in an atmosphere of mutual responsibility and shared destiny."

In
a speech by Rodrigo de Rato, the IMF Managing Director, he said, "the
IMF should pay the role of "umpire" in the international system."
He explained that "neither the players nor the rules of the same are
static. The days when G7 finance ministers could sit in a hotel room
and make decisions about exchange rates are gone. This is a whole
new ballgame." He went on to say, "As the players and the ground rules
in the global economy change, we have the capacity to reflect these
changes, and to be the place where policy makers can come together
to shape the forces of globalization and make it work for us." He
talked about the issue of surveillance and the problem of global imbalances
and how "coordinated action would be both politically easier and economically
more effective than governments in systemically important countries
acting alone.

He
proposed that the Fund begin REGIONAL consultations (my words, not
his). He described it as "the Fund complement its existing arrangements
for consultations with individual countries with multilateral consultations,
which would allow the Fund to take up issues comprehensively and collectively
with systemically important members and, where relevant with entities
formed by groups of members such as the EU and the Gulf Cooperation
Council." The IMF is now calling for regional not individual country
participation. The IMF will devise a "more systematic assessment of
the consistency of exchange rate policies with national and international
stability."

There
was also a great deal of talk about "shared responsibility" and "multi-stakeholder"
participation. Multi-stakeholder participation refers to the fact
that in the 21st century interdependent world, ALL ACTORS must work
together: government, business, NGO's, labor unions, academia, etc.
NO ONE CAN DO IT ALONE! The phrase "interdependent" not only refers
to a world without borders, it also refers to the fact that no one
country, NGO, business, labor union, etc. can do it alone. There is
a new glue that now holds the world together.

Secretary
Snow Remarks

The
G7 met at a time when global economy performing in a strong, sound
way. The U.S. is the strength and stability of the global economy.
Growth is strong throughout the globe with Europe picking up some--getting
closer to their potential-- but still falling short. With Japan's
growth having picked up nicely and growth in other parts of the world-India/China
is string, sub-Sahara /Africa much stronger than it has been. In fact,
the global economy is in the best shape than it has been in a long,
long time. Strong growth, high productivity, inflation well contained
with regard to historical standards and with the net result that per
capita income across the globe is rising in ways we have not seen
in a long, long time.

Where
ever you look across the globe you see growth, you see stability-no
crises anywhere, no recessions. Fundamentals appear strong and we
need to take steps to ensure that we stay on it. That is one of the
subjects that the G7 finance ministers and central bank governors
addressed. I confirmed for our G7 colleagues the fact that the U.S.
is on a good path. The fundamentals of our economy are good. We are
growing at a good clip. We are creating jobs and real wages are rising,
productivity is high and inflation remains well uh- contained. Uh
we started this morning with an IMF sponsored conference on "Global
Balances"- uh sometimes the phrase is "Imbalances" but it is really
balances because the other side of the current account deficit is
capital account surplus-it is just the math of the global economy.
You will see appended to the Communiqué an Appendix because it reviews
the matters which were discussed at the IMF meeting this morning.

I
commend Rodrigo de Rato for calling the conference and clearly putting
the IMF in the middle of bi-lateral and multi-lateral surveillance.
The G7 Finance Ministers and Central Bank governors gave the IMF a
strong remit today to proceed with surveillance and to make surveillance
a critical priority of the IMF, following very much the lead that
Rodrigo de Rato gave us in his recent white paper. The focal point
of the conference, I was pleased to see, at the conference on Global
balances was the fact that there was shared responsibility. All
of us in the global economy have a part to play. We have a role
to play and that no one of us on our own can individually address
the issue effectively. On the part of the U.S. we know that we need
to raise savings rates and deal with our deficit. We are dealing with
the deficit, of course, the deficit is on a good downward path and
the president is committed to cutting it in half before he leaves
office. That is the path we are on. We are going to achieve that objective
and bring the deficit; by the time he leaves office, to a level that
is low by historical standards. I was pleased to be able to review
that picture and outlook with my colleagues.

We
also talked about the role of other participants in the global economies.
The need for the EU and Japan to continue to take strides to remove
impediments that stand in the way of their coming closer to their
full potential. To get at the things that hold back the dynamism of
their economies. We also talked about the need for countries that
have rigid exchange rates-don't' have flexible exchange rates-to move
to greater flexibility because it helps that adjustment process. We
also talked about strategies to deal with sizeable current account
surpluses that we find in the oil exporting countries-the so called
"petrodollars". I found that discussion very, very useful. Confirming
basically the approach the G7 has already taken to deal with the global
balances.

I
was pleased to see our colleagues share our view that fundamental
reform of the IMF is the order of the day, both going to the issue
of their mission-their fundamental mission--which has to be focused
on surveillance and the balances and global flows, both bilateral
and multilateral, and the governance issues of the agents of the IMF
which were also addressed and you will see they are covered in the
communiqué. We also, the G7 talked about the financial war on
terror and I was able to lay out some of the initiatives we in the
U.S. are taking. We have to be continuously vigilant on that subject
and the U.S. in the forefront on the Financial War on Terror-the forefront
of using the authority that we have to go after terrorist funding
and terrorist networks and to use those tools to follow terrorist
monies to the terrorist themselves. The money flows don't lie and
we can effectively use money flows to identify terrorists and terrorist
cells. We have had a chance to do that. I hope you have had a chance
to see the Communiqué and annex and will respond to your questions.

First
question about Russia and some meeting. Could not clearly hear it.

Snow:
We had a good meeting. I feel we are making progress but I feel we
are making good progress and a continuation that Minister Kudron and
I had when we were in Moscow on the WTO. This was a follow-on to those
discussions and I think there is progress being made and I remain
optimistic that we can work out the WTO agreement.

Question:
Could not hear.

Snow:
Yes, pause - the issue of trade was much on our minds. Both the positive
side and encouraging trade liberalization through the Doha Round which
is very much on the minds of the finance ministers and central bank
governors and something we are trying to lend support to and our weight
to. The other side of the issue is to make sure that countries don't
take up protectionist policies. I think the evidence is overwhelming
that the global economy has benefited and the countries that comprise
the global economy have benefited enormously from trade liberalization,
from the ability on a scale we have never known before, to allow the
principles of comparative advantage to operate and we see it lifting
up the people's of the world and there is nothing that can be do that
this more beneficial to the developing world to making progress on
trade liberalization.

The
World Bank Studies indicate disproportionate share of the Doha Round
liberalizations will go to developing countries and will have sizeable
impact over a period of time on standards of living. But we need to
be and that is the point of the Communiqué--we need to be on guard
against barriers that would restrict the flow of goods and services
and stand in the way of letting the benefits of trade be shared on
the globe.

Veon:
Mr. Secretary in your Statement you say that "greater flexibility
will help resolve global imbalances". Paul Volcker and other economies
are advocating a basket of currencies or some kind of global currency
in the future-can you comment on that?

Snow:
What we think it involves are things that are reflected in the Communiqué-the
Annex to the Communiqué. It think this framework that we have laid
out with the other G7 finance ministers, now largely embraced by the
IMF, so that same framework repeated yesterday in the statement of
IMF Chief Economist. It's seems to us that this is the fright framework.
It is a framework that calls on countries to do things that are in
their own interests. Its in the interest of Europe to grow faster,
it is in the interest of the peoples of Europe to grow faster and
create more investment opportunities. Thus, use the labor force of
Europe more effectively and deal with double-digit unemployment rates
that can't be acceptable to the people of Europe to have double-digit
unemployment.

The
answer to that is to have a more dynamic economy that is growing and
absorbing the labor force more effectively. By the same token in parts
of the world where currencies are not allowed to reflect underlying
realities that is crating a barrier to the improved performance on
these imbalances but it is also penalizing the citizens of those countries
because it gets in the way of those currencies reflecting the real
value and if the real value would have the currency be higher than
that means the country is giving up purchasing power. Thus, ipso factor,
by its very nature, reducing the standard of its citizens and also
getting in the way of the monetary authorities ability to deal with
inflation-ah, ah--so in sending the wrong signals to the economy so
that investments are not occurring in the places where they create
the greatest value for the economy-that is the proper balance between
tradable and non-tradable sectors.

In
the United States, it is very much in our interest to deal with this
deficit, to bring it down and increase our own household savings rates.
One of the main points that came out of our discussion of the Global
Balances though is the importance of addressing the question in a
way that sustains growth. It would be easy to reduce the U.S. current
account deficit; nobody wants to see it happen that way. The Europeans
don'ts, the citizens of South America don't want it to happen that
way and neither do the people of Asia. So central to getting the whole
equation right is that the U.S. continues to have good growth rates.
If we are going to have good rates, then we have to resist calls to
raise taxes because higher taxes aren't consistent with sustaining
our high growth rates.

Question:
Flexibility in Asian countries…the dollar might go down…do you have
comment. Do you think it is a good thing for the IMF since you are
encouraging surveillance ….

Snow:
What you are referring to because that certainly wasn't the conversation
during my participation in this morning's conference. The conference
as indicated in the Annex, concentrated on the question of global
savings and investments and what is the current account deficit and
capital account surplus - but the difference really between a country's
savings and its investments. If it a country like the U.S. that you
are looking at then what we see is strong growth creating lots of
investment opportunities-- greater than our own savings so we are
attracting savings from the world and by the same token, countries
that are in the surplus position, are generating more savings than
investments.

That
is the definition of the capital account surplus and the current account
deficit and that was the subject. One of the issues that was discussed
was how the rest of the world will adjust as the United States returns
in the future to more normal growth rates. We have been growing above
trend. We had a recession, the stock market crash, overinvestment
in the 90's. We paid the price with a recession and we are coming
out of a recession and when you come out of recession, because of
good policies from the Fed and from the Bush administration, we have
been able to grow at a high rate-substantially.

We
are coming out of this recession better that how we came out of the
last one. In the last 3 years, we have been growing at 3.8%. The
basic growth potential of a fully employed economy is closer to 3.1%
or 3.2%. So if the U.S. is going to be heading back to trend over
time-can't exceed trend forever right. Trend is as a result of workforce
participation rates and productivity and those give you the increase
in GDP output. At some point, you have drawn into the workforce the
unemployed and underemployed in capital resources. At that point,
you get closer to trend.

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One
of the discussions was that as we get back to trend, how does the
rest of the world adjust? Who picks up the slack? That is a serious
subject because it goes to higher growth rates in other parts of the
world and we can't grow above trend indefinitely, if the global economy
is going to continue to have strong growth that it needs, were is
it going to come from? Our slowing of growth means some slowdown in
growth rates of our imports, right? That creates a natural savings
process.

Joan Veon is a businesswoman and international
reporter, having covered 64 Global meetings around the world in the last
ten years. Please visit her website: www.womensgroup.org.
To get a copy of her WTO report, send $10.00 to The Women's International
Media Group, Inc. P. O. Box 77, Middletown, MD 21769. For an information
packet, please call 301-371-0541

In
January, the Bank for International Settlements chief economist, William
White wrote a white paper of his own calling for a return to the gold
standard or global or regional currencies to help with global imbalances
and for the IMF to have the power of surveillance over a country's finances...